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VELCO urges lawmakers to plan for costly transmission upgrades

By JOHN HERRICK / VTDigger

Posted:
04/05/2014 07:51:48 PM EDT

Updated:
04/05/2014 07:53:34 PM EDT

MONTPELIER -- The state's transmission utility told lawmakers to keep a close watch on the region's costly electrical transmission build-out - a portion of which Vermont ratepayers are required to pay.

The Vermont Electric Power Co. (VELCO) said Vermont has improved much of its electrical infrastructure designed to increase reliability, but other states have not.

"And what we are seeing is a continuing rise of the regional transmission costs that Vermont will be required to pay a portion of," VELCO Vice President Kerrick Johnson, told the House Commerce and Economic Development Committee on Friday.

Political and economic forces are replacing fossil fuel-powered generation units with smaller, renewable energy sources, a trend expected to accelerate over the next several years, according to the region's grid operator, ISO New England.

VELCO vice president Kerrick Johnson testified before the House Commerce and Economic Development Committee on Friday to discuss regional transmission development. (Photo by John Herrick/VTDigger)

As a result, the region is expecting to invest $5 billion into projects designed to improve weaknesses in remote areas of the grid to ensure renewable power generators can quickly respond to changes in demand.

Because all six New England states benefit from a reliable power grid, the cost of these projects is shared. Vermont pays about 4 percent of the total cost, which would be about $200 million over the next four years, Johnson said.

"That's just to keep the lights on," he said.

Committee Chair Rep. Bill Botzow, D-Bennington, said he will consider whether any legislative action is needed "to make sure Vermont is in a favorable position."

"Nobody is asking for legislation.

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I'm sure that the (Public Service) department would come to us if they thought something was needed and I'm sure industry would come to us if they thought something was needed," Botzow said. "And if they did, we would respond."

Department of Public Service Commissioner Chris Recchia, who is speaking regularly with regional stakeholders, said he will work to drive down the cost of these reliability projects in other states.

Over the past decade, he said Vermont has invested about $1 billion in similar projects. This cost was shared with other states.

"Now the other states are trying to do the same things that they need to do, but we need them to pay attention to costs," he said. "We are still connected to the regional grid that is somewhat out of our control. And that makes me nervous."

Through efficiency and distributed generation projects, for example, Vermont reduced the cost of its reliability projects by about $400 million, Recchia said. He wants to share these lessons with other states to shave costs.

But the region has other plans as well. Vermont is stuck between Canadian hydroelectric and wind power supplies in the north and growing demand for renewable energy in the south.

"The cheapest place between supply and demand is through Vermont, just in terms of line miles," Johnson said. "We're the shortest route."

The six New England governors last year agreed to launch a bidding process to attract imports of Canadian renewable power and natural gas with a ratepayer-backed guaranteed return on investment. The bidding process could be opened as soon as this fall, Recchia said.

The states want to import up to 3,600 megawatts of electricity from Canada, but Johnson said the states have not agreed on the best way to share the cost of importing this power. And, he said it is unclear whether Canada can provide that amount of power.

Nonetheless, he said there is about a "60-40" chance that the plan goes through.

"How real is this? There's six New England states, it's an election year, there are large costs," he said. "Having said that, there are three projects that are already in the queue."

Anbaric, a Massachusetts-based developer, is proposing the Grand Isle Intertie, which would bring wind power from New York to a Burlington substation. The company has said it still needs state and federal approval but has filed for an interconnection feasibility study.

TDI New England, a branch of a New York financial firm, is proposing a project to bring hydroelectric power from Canada, under Lake Champlain, and to a substation in southern Vermont. The company has said it has the money for the project but still needs regulatory approval.

It is unclear how Vermont can best take advantage of these proposed projects, Johnson said.

"There is opportunity for Vermont here," he said. "What do we get out of this? If we're going to be some kind of green corridor, what's the way to maximize the value?"

He said VELCO could invest in these lines, rent out right-of-ways, and sell environmental and cultural assessments for building projects in the state.

Johnson said Massachusetts is in the process of developing legislation that could require the state to import large amounts of renewable energy to meet proposed energy portfolio standards.

"There new legislation that's being considered," he said. "Massachusetts, one of the biggest players in New England, drives a lit of the regional debate," he said.

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